AI contract review systems combine several advanced technologies to automate traditionally manual legal processes. These systems work through a sophisticated multi-step workflow that begins when a contract is uploaded to the platform. 

First, Optical Character Recognition (OCR) technology converts scanned documents into machine-readable text. This digitized content then enters a Natural Language Processing (NLP) pipeline where the AI parses the document structure, identifying sections, clauses, and hierarchical relationships. 

The system's language understanding capabilities then extract key information using named entity recognition to identify parties, dates, monetary values, and locations. More advanced systems employ semantic analysis to understand contractual obligations, rights, conditions, and termination clauses. 

Contract review AI leverages machine learning models trained on thousands of legal documents to recognize standard clauses and identify unusual provisions. These models compare contract language against databases of standard terms, flagging deviations that might require attorney attention. The AI assesses risk by evaluating clauses against predefined criteria and organizational requirements. 

Behind the scenes, these systems maintain clause libraries that catalog standard legal language. When reviewing a new contract, the AI matches text against these libraries to identify missing clauses or suggest improvements. Many platforms use large language models to generate explanations of complex legal concepts in simpler terms for non-legal stakeholders. 

The AI creates customizable reports highlighting potential issues, risks, and recommendations. Most systems maintain audit trails documenting all changes and approval workflows. The technology continuously improves through feedback loops - every contract review provides new training data to enhance future performance. 

Modern contract review AI doesn't work in isolation; it integrates with contract lifecycle management systems, document repositories, and e-signature platforms. While powerful, these systems still work best alongside human legal experts who provide context, judgment, and strategic decision-making that AI currently cannot replicate.